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- Small Business Liability Insurance – Is a Disaster Just Around the Corner?

Small business liability insurance is one of those things that too many small and home based business owners don’t have and frankly just can’t see the need for. In many cases this is a bad business decision that can come back to haunt you worse than any late night movie. This is especially true for anyone who owns a home based business such as consulting or one that sends employees out to work on other people’s property, such as landscaping or painting.

In many cases contractors will be required to be bonded to get a license to ply their trade, but this is not the same as insurance. Such a bond, called a surety bond, merely insures that in the event you fail to complete a contract, the contractee can recover damages from the bond. The bond does not protect you as a business owner, it protects your customer.

If you have a substantial amount of office equipment in your home office, you should at least ask your homeowner’s insurance company to give you a home office rider to protect the contents of your office. In many standard homeowners policies, the contents of you home office will not be included.

Small business liability insurance is very important for most types of small business these days, even if you have a home based business. Should you say the wrong thing you risk a defamation lawsuit, you could be sued for a product you’ve sold, or a customer could be injured on your property. All of these events could be devastating should you be uninsured. Liability insurance will protect you and your business against such a problem. There are many situations where a liability problem could arise that your insurance would kick in to protect you.

If you are a consultant, you could give advice that causes a problem. This could precipitate a lawsuit. One of your employees could damage someone else’s property in the course of business and you would be liable for the damage.

If you run any type of business out of you home that requires you or any employees to drive company owned vehicles during the normal course of business, such as process serving, delivery, contracting or landscaping, you’ll want to get business vehicle insurance. Before you hire a new employee, be sure to have their driving record checked to make sure that they are insurable or that they will not raise your rates too much. This can also protect you against any liability incurred while you or an employee are driving the vehicles. Your standard auto insurance will not cover for business related use in most cases.

If you do contracting work for some companies, they’ll require you to name them as an additional insured on your insurance policy, thereby indemnifying them against damages to the limit of the policy. That way they can be more protected against problems because they are protected by your policy. In that case you better have insurance, because you’ll need to show them a certificate naming them as an additional insured; you can’t just bluff your way through it.

The most important thing for your business is liability insurance. It only takes one slip up by an employee on someone’s property, or an incorrect consulting opinion to cost your business plenty. Typically the most cost effective option is to check with an insurance broker that represents multiple lines and specializes in small business insurance. You’ll get some piece of mind and it probably won’t cost as much as you think.


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